Using an efficient expression cloning system developed in the lab. a novel oncogene. designated ost was isolated from a rat osteosarcoma cDNA library. The cloned ost cDNA possesses high transforming activity in NIH/3T3 cells. The ost product was activated by truncation of its N- terminal domain and was highly tumorigenic in nude mouse assays. The full-length ost cDNA was subsequently isolated and encodes a predicted protein of 100 kilodaltons containing the OH (dbl homology) and PH (pleckstrin homology) domains. Ost is mainly phosphorylated on serine and localized in the cytoplasm. Among the tissues examined. brain showed the highest expression of Ost. especially in neurons and alpha-tanycytes. Baculovirus-expressed Ost can catalyze guanine nucleotide exchange on RhoA and Cdc42 among Rho and Ras family members tested. Ost did not detectably associate with RhoA or Cdc42. but interacted specifically with the GTP-bound form of Rac1. These results implicate Ost as a critical regulatory component which links the signal transduction pathways that flow through Rac1, RhoA and Cdc42.